A pool of 1,248 mortgage loans on a range of investment residential properties, including single-family homes, condominiums and multi-unit properties, will secure $345.8 million in mortgage-backed securities through the Ellington Financial Mortgage Trust 2025-INV2 transaction.
The deal, EFMT 2025-INV2, offers notes through about nine tranches of class A, M and B notes, with X and R tranches that represent excess cashflow and residual pieces, according to S&P Global Ratings, which assessed the deal.
The senior, class A notes will be repaid on a pro rata basis, while the mezzanine and subordinate notes will be repaid sequentially. Credit enhancement on the A1 notes represent 36.8% of the note balance, while enhancement on the A2 and A3 notes totals 27.5% and 14.8% of the note balance, respectively.
Barclays is the structuring lead on the deal, while Bank of America and Mizuho Securities are participating as joint leads, according to Finsight.
The entire pool of loans, which finance 1,314 properties, is exempt from Ability to Repay rules. Also, almost all the loans in the pool, 92.6%, were underwritten using debt service coverage ratio (DSCR) guidelines, S&P said.
But the details tell a much stronger credit story. The loans have an average balance of $277,074, S&P said. On a weighted average (WA) basis, the loans have an original cumulative loan-to-value of 69.7%, and borrowers had a debt-to-income ratio of 32.3%.
The deal managers sourced the loans in the pool from various originators, S&P said. RCN Capital, Oaktree Funding and United Wholesale Mortgage are among the originators that account for more than 10% of the collateral pool. RCN Capital represents the largest share, with 22.78% of the pool.
Class A notes gain credit protection from subordination, which shuts the class M and lower notes out from any principal payments until the class A notes are retired, S&P said. Also, the transaction will benefit from excess monthly collections, to cover any interest shortfalls. Extra cashflow will also pay principal on cumulative realized losses in the classes up to date in the deal, the rating agency said.
S&P assigned AAA to the A1 notes; AA- and A- to the A2 and A3 notes, respectively. The rating agency assigned BBB-, BB- and B- to the M1, B1 and B2 tranches, respectively.
